Singapore, January 31, 2019 -- Moody's Investors Service has assigned Baa2 backed senior unsecured debt
ratings to the planned US dollar-denominated sukuks (trust certificates)
to be issued by the Government of Indonesia (Baa2 stable) through Perusahaan
Penerbit SBSN Indonesia III ("PPSI III") under its existing $25
billion trust certificate issuance program. The ratings apply to
all the proposed tranche issuances, including a green sukuk tranche.
The notes will rank pari passu with all of the Government of Indonesia's
current and future senior unsecured external debt. The proceeds
of the notes are intended to finance or re-finance expenditure
directly, including financing of eligible green projects for the
green sukuk tranche. In Moody's opinion, the payment obligations
represented by the securities to be issued by PPSI III are ranked pari
passu with other senior, unsecured debt issuances of the Government
of Indonesia.
The rating mirrors the Government of Indonesia's long-term issuer
rating of Baa2 with a stable outlook. Moody's notes that its sukuk
ratings do not express an opinion on the structures' compliance with Shari'ah
law.
RATINGS RATIONALE
Indonesia's Baa2 issuer rating is underpinned by policy emphasis on macroeconomic
stability that increases its resilience to shocks. The sovereign's
credit profile is supported by narrow fiscal deficits and low government
debt ratios. The large size of its economy and healthy and stable
growth prospects act as credit supports. Credit challenges include
low revenue mobilization, and a reliance on external funding.
The stable outlook reflects balanced risks at Baa2. It incorporates
downside risks from political challenges to further implementation of
broad economic, fiscal and regulatory reforms. We expect
effective reforms to proceed relatively slowly, with potential delays
or reversals to occur, especially - although not only -
ahead of presidential elections in April 2019,when reforms involve
increasing competition with a negative impact on incumbents.
The stable outlook also takes into account upside risks from a potential
improvement in competitiveness as a result of effective reform implementation.
The present administration has passed various policy packages targeted
primarily at improving the investment environment. The effectiveness
of these policies in improving the attractiveness of Indonesia as an investment
destination remains to be seen. Policy-makers' perseverance
in this direction is key to ensuring that GDP growth moves towards the
country's potential levels.
WHAT WOULD MOVE THE RATING UP/DOWN
The stable outlook on the Government of Indonesia indicates that rating
changes are unlikely in the foreseeable future.
Over time, indications that fiscal policy measures can durably and
significantly raise government revenue would put upward pressure on the
rating. Higher revenue would enhance fiscal flexibility and provide
more direct financial means for the government to address large social
and physical infrastructure spending needs.
An upgrade to the issuer rating would also result from further progress
towards achieving stronger growth potential, commensurate with the
country's population growth and income levels, including through
a deepening of financial markets and improved competitiveness.
An upgrade would result from further progress in reducing external vulnerabilities
and improving institutional strength. This assessment would be
supported by a reduction in the government's reliance on external debt,
or tangible evidence that reforms foster investment, competitiveness
or sustained increases in revenues.
On the other hand, downward pressure would arise if: 1) evidence
indicates that the strengthening of Indonesia's policy framework and institutions
stalls or reverses; 2) Moody's concluded that the prospects of medium-term
broadening of the revenue base are limited, indicating limitations
to policy effectiveness and posing continued constraints to economic growth;
3) the financial strength of state-owned enterprises (SOEs) materially
worsened pointing to a rising likelihood for material contingent liabilities
to crystallize on the government's balance sheet.
This credit rating and any associated review or outlook has been assigned
on an anticipated/subsequent basis. Please see the most recent
credit rating announcement posted on the issuer's page on www.moodys.com,
under the research tab, for related economic statistics included
in rating announcements published after June 3, 2013.
This credit rating and any associated review or outlook has been assigned
on an anticipated/subsequent basis. Please see the most recent
credit rating announcement posted on the issuer's page on www.moodys.com,
under the research tab, for related summary rating committee minutes
included in rating announcements published after June 3, 2013.
The principal methodology used in this rating was Sovereign Bond Ratings
published in November 2018. Please see the Rating Methodologies
page on www.moodys.com for a copy of this methodology.
The weighting of all rating factors is described in the methodology used
in this credit rating action, if applicable.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Anushka Shah
Vice President - Senior Analyst
Sovereign Risk Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Marie Diron
MD - Sovereign Risk
Sovereign Risk Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
